Marks and Spencer 2008 Annual Report Download - page 41

The Board is committed to achieving success for the Company
by building a sustainable business for the long term, generating
shareholder value through consistent profitable growth whilst
making sure that our customers can always trust us to do the
right thing. This statement explains our governance policies
and practices and provides insight into how the Board and
management run the business for the benefit of shareholders.
The governance rules which apply to all UK companies listed
on the London Stock Exchange are found in the Combined
Code on Corporate Governance which was updated by the
Financial Reporting Council in June 2006 (the ‘Code’).
A detailed account of how the Company has applied the
Code’s principles and how we comply with its provisions
can be found on our website at
marksandspencer.com/thecompany
The Board
The Board’s role is to:
• provide entrepreneurial leadership of the Company
within a framework of prudent and effective controls
which enables risk to be assessed and managed;
• set the Company’s strategic aims, ensuring that the
necessary financial and human resources are in place
for the Company to meet its objectives and review
management performance; and
• set the Company’s values and standards and ensure
that its obligations to its shareholders and others are
understood and met.
All directors are individually briefed on appointment, on the
duties they owe as directors to the Company. During the year,
the directors have been briefed on their new statutory duties
as set out in the Companies Act 2006, which came into effect
on 1 October 2007. The central duty is the duty to act in good
faith and in a way most likely to promote the success of the
Company for the benefit of its members as a whole. In fulfilling
this duty, directors should have regard (amongst other matters)
to the likely consequences of any decision in the long term;
the interests of employees; the need to foster business
relationships with suppliers, customers and others; the impact
of operations on the community and the environment; the
desirability of maintaining a reputation for high standards
of business conduct; and the need to act fairly between
members of the Company.
The non-executive directors play a key governance role
in protecting shareholders’ interests. They are independent
and bring an external dimension to the Board, whilst
complementing the skills and experience of the executive
directors through their range of knowledge, experience and
insight from other sectors.
In January 2007 we announced Plan A, our business wide
‘eco plan’ setting out our ambitions to change the way we
operate over the next five years. We are committed to our
principles of Quality, Value, Service, Innovation and Trust.
Trust is earned from others as a result of our commitment to
long-held values and the way we behave. Our Code of Ethics
is available on our website. It outlines the behaviours that
M&S expects from its employees, whether they are dealing
with our customers, suppliers, shareholders or colleagues.
This includes acting in a professional manner with honesty
and integrity at all times and following Company policies and
procedures. It also sets out guidelines on the environment,
fraud and financial reporting, the management of conflicts
of interest and how to raise concerns about possible
improprieties in financial reporting or other matters. Senior
managers sign their acceptance of the Code of Ethics each
year and ensure it is applied in their areas of responsibility.
New Board structure
On 10 March 2008 we announced Board and senior
management changes. We stated that Lord Burns would stand
down as Chairman from 1 June 2008, when Sir Stuart Rose
would be appointed Executive Chairman.
On 3 April 2008 Lord Burns wrote to shareholders setting
out the detailed reasons behind the Board’s decisions. A copy
of this letter is available on our website. The Board has taken
this decision, cognisant of its prime objective to ensure the
Company’s ongoing commercial success, and has put in
place balancing controls to mitigate the governance concerns:
• limited period of appointment of combined Chairman
and Chief Executive until July 2011;
• appointment of Sir David Michels as Deputy Chairman;
• clear specification of duties of Executive Chairman
and Deputy Chairman to ensure proper division of
responsibilities and balance of power;
• appointment of two new executive directors and
increased responsibility for the Group Finance and
Operations Director;
• recruitment of an additional non-executive director to
ensure a majority of independent directors on the Board.
Following that appointment, the Board will consider the
appointment of a further non-executive; and
• annual voting by shareholders for Sir Stuart Rose’s
reappointment as a director starting at the 2008 AGM.
The Board unanimously believes that the overall arrangements
represent a sensible way forward and provide a sound
transitional governance structure leading to the appointment
of a new Chairman and separate Chief Executive by summer
2011. The new structure will ensure continuity of leadership,
strengthen the Board and streamline the organisation. This
will focus everyone on business performance during a period
of significant trading uncertainty and it addresses investor
concerns over succession.
Consultation with shareholders
The Code states that: “If exceptionally a Board decides that
a Chief Executive should become Chairman, the Board should
consult major shareholders in advance and should set out its
reasons to shareholders at the time of the appointment and
in the next annual report”.
In the period leading up to the announcement on 10 March
2008 of the Board and senior management changes, the
Board considered how best to communicate with shareholders.
The changes proposed as part of the new governance and
management structure were wide-ranging and not only included
the appointment of the Executive Chairman and Deputy
Chairman but two new Board appointments, the extension
of the Finance Director’s role and a large number of senior
management appointments, as well as news of the departures
of several members of the senior management team.
Corporate governance statement
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